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Koeq Enterprises is considering a long-term investment project called ZIP. ZIP will require an investment of NT$1,200,000.

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Koeq Enterprises is considering a long-term investment project called ZIP. ZIP will require an investment of NT$1,200,000. It will have a useful life of 4 years and no residual value. Annual revenues would increase by NT$800,000, and annual expenses (excluding depreciation) would increase by NT$410,000. Koeq uses the straight-line method to compute depreciation expense. The company’s required rate of return is 12%. Compute the annual rate of return.

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Revenues NT800000 Less Expenses excluding depreciation NT410000 Depreciation ...View the full answer


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Accounting Principles

Accounting Principles

ISBN: 978-1119419617

IFRS global edition

Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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